Secondary Sources: Germany on Greece, Deficit Promises, All You Can Eat

–Germany on Greece: The Bundesbank offers its take on the situation in Greece. “Current developments in Greece are extremely worrying. Greece is threatening not to implement the reform and consolidation measures that were agreed in return for the large-scale aid programmes. This jeopardises the continued provision of assistance. Greece would have to bear the consequences of such a scenario. The challenges this would create for the euro area and Germany would be considerable, but manageable given prudent crisis management. By contrast, a significant dilution of existing agreements would damage confidence in all euro-area agreements and treaties and strongly weaken incentives for national reform and consolidation measures. In such circumstances the institutional status quo comprising liability, control and individual responsibility of member states would be fundamentally called into question. When the Eurosystem provided Greece with large amounts of liquidity, it trusted that the programmes would be implemented and thereby ultimately assumed considerable risks. In the light of the current situation, it should not significantly increase these risks. Instead, the parliaments and governments of the member states should decide on the manner in which any further financial assistance is provided and therefore whether the associated risks should be assumed.”

–Deficit Promises:Peter Orszag says history shows that Congress often keeps its legislated promises to trim the deficit. “When policy makers put in place measures carefully designed to reduce the federal deficit in the future, most of them happen. This is a good thing, since enacting more stimulus today and more deficit reduction to take effect later is exactly what the U.S. needs. It’s also what makes the ongoing jobs-versus-austerity debate so frustrating. What we really need is to be bolder on both jobs and austerity, by pursuing a combination policy. Additional stimulus is required because the labor market remains extremely weak. Delayed deficit reduction is also needed to reduce uncertainty over how the federal government will navigate its perilous fiscal path — and to boost the chances of enacting more stimulus despite the looming debt limit.”

–All You Can Eat:Adam Ozimek says that all you can eat buffets shouldn’t exist. “When someone offers all-you-can-eat to any customers, those that show up should be ones for whom the amount that they can eat is worth more than the price they expect to pay. After all, if the buffet costs $10 no matter how much you eat then those who eat the most will get the most value out of it. But the average amount consumed can’t exceed the price, otherwise the restaurant will lose money and go out of business. So if the average amount consumed is $16 worth of food, then the restaurant will have to raise the price to above $16. But this means those who more than $10 but less than $16 worth of food will no longer find it worthwhile to eat there, so they will stop going, and the average customer left will be those who eat more than $16 worth. This process continues, until there is only one guy left going to the buffet, and he eats $300 worth of fish and is charged exactly $300 for it. In effect, this theory says that all-you-can-eat buffets should not exist. And yet they do, and for the most part the adverse selection problem does not cause problems.”

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